Demand for windfall tax on banking sector greeted with scorn as firms 'not cashcows'

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Demands for a windfall tax on banks have been met with resistance. It comes after HSBC has this week seen its quarterly profits jump as it raked in more income from rising interest rates. Barclays today overtook market expectations and reported pre-tax profits of £2billion for the third quarter.

HSBC reported adjusted pre-tax profits for the three months to September 30 of £5.76billion up from £4.87bn a year earlier.

It also beat market expectations, which had predicted £5.32bn in profits for the quarter.

In response, the Liberal Democrats are now calling for a windfall tax on the banking sector as Government seeks ways to plug a £40billion hole in the public finances.

The Bank of England has increased rates to 2.25 percent from record lows of 0.1 percent last year in a bid to bring down double-digit inflation.

Mr Hewson said: “Banks have been in a very difficult economic environment while being encouraged to lend to consumers and businesses to grow the economy. Now interest rates are starting to go up and they are starting to benefit, politicians suddenly think it’s okay to make money from them.

“A windfall tax does not incentivise banks to invest in the real economy. If you restrict banks’ ability to generate profits for share holders, you undermine that profit incentive.

“Why should banks or any other company have to be on the end of a windfall tax? Politicians think companies are a cash cow and they’re not. It just highlights the low calibre of politicians we have these days.

“If a company has a good year one year they pay more corporation tax. But do governments care if they make a loss another year? No, they don’t. Banks do have a case to answer for the rate they pay depositors and the rate they charge for loans. But no one seems to be talking about that. Rather than talking about a windfall tax, ask why banks don’t pay more in interest.”

Ms Olney told Express.co.uk: “Hard pressed families will rightly feel short changed when they see that their spiralling mortgage bills are leading to even larger profits for big banks.

“The Conservatives have shown time and again that they’ve got their priorities wrong – putting the interests of big business ahead of families. Ministers must ensure that banks pay their fair share of tax during this crisis, starting by ruling out a cut to the Bank Surcharge.”

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Barclays’ profits jumped six percent on last year’s £1.9bn and beat the consensus of £1.8bn for the period.

The uplift has largely been a result of a fixed income boom, which surged by 63 percent to £4.7bn for its international division, as its clients upped trading during recent market volatility.

Nevertheless, the banking giant set aside £381million in credit impairment charges, more than triple the £120mn in charges it reported a year ago.

This has been driven by the declining economic forecast with the bank acknowledging customers in the UK are more vulnerable to high inflation and rising interest rates.

Anna Cross, Barclays’ group finance director, said: “We are not observing any worrying signs of stress in the book across any of our portfolios.

“Having said that, we are managing our book very prudently. In the context of impairments, we have been cautious and we believe we are well covered and well provided.”

Ms Cross explained that while consumer confidence has dipped, it is likely to play out in positive ways in terms of money management.

Barclays reported income from its personal banking in the UK surging 14 percent to £3.3bn, driven by rising interest rates which has made it more costly for people to borrow.

In its quarterly results, HSBC saw its net interest margin – a key measure of the returns it makes on loans – increase to 1.57 percent in the third quarter from 1.19 percent a year ago.

This has been bumped up by a rise in the Bank of England’s base rate in recent months.

Banks are able to make higher profits as they can take in more money from people’s loan repayments.

In 2023, HSBC expects to hold on to at least £31.83 billion in net interest income.



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